Prosper Personal Loans Review

Prosper is a good option for those who can’t get a loan from a traditional bank and don’t want the high interest rates offered by credit cards and payday loans.

Prosper is a peer-to-peer lender, which means regular people invest small amounts of money to cover your loan. As you repay it, the investors get their money back with interest. Prosper will accept high-risk borrowers that a traditional bank or credit union would turn down for a loan; although, high-risk borrowers pay much higher interest rates. Applying is easy. You can see if you qualify and get an estimate on what your rate will be in just a matter of minutes after completing a short online application. Then, all you do is create a loan listing describing what you need the money for and why, post it, and wait for the funds to come in.

If you’re hoping for a same-day deposit, however, Prosper isn’t the lender for you. Because your loan is paid for by many investors instead of just one, you won’t get your money immediately. Prosper also charges an origination fee equal to two to five percent of the amount of your loan. Another potential pitfall is that Prosper only offers three- and five-year terms. If you’re interested in a shorter loan repayment term, you can always choose to pay off a little extra each month, but if you need more time, you may have to go with another company.

The Specs

Interest Rates

5.99-35.99%

Loan Amounts

$2,000 to $35,000

Loan Terms

Three or five years

Requirements

FICO score of 640 or above
Debt-to-income ratio below 50%
Income greater than $0
No bankruptcies in the last year
Fewer than seven credit bureau inquiries in the last six months
Minimum of three open trades on your credit report

The Claim

Prosper is a pioneer in peer-to-peer lending, cutting out the middleman and connecting borrowers and lenders directly. Borrowers — even those with bad credit — can get their loan funded by other members of the Prosper community, and investors can help out their peers and earn great returns at the same time. Everyone wins.

Is it True?

Yes. Prosper provides an alternative to a traditional loan from a bank without the high risk of a payday loan. It’s a great choice if you have trouble getting financing through a traditional lender, because Prosper looks at more than just your income and credit score to determine your ability to repay a loan. It also gives you the opportunity to create a profile, explaining what you need the money for and why your credit is so poor, allowing your “peers” to determine your creditworthiness on their own.

Investors contribute small amounts, sometimes as low as $25, to your loan. This small investment decreases the risk of loaning money to you, which means that even high-risk borrowers shouldn’t have too much trouble getting the money they need. But because many investors contribute to your loan, you may not get the money you need all at once, so if you need funds immediately, Prosper may not be the right choice for you.

As with any lender, Prosper offers lower interest rates to those with better credit, and higher rates to borrowers perceived as higher risk. Before you go through the trouble of making a profile and a loan listing, you can check your rate by filling out a simple form on Prosper. This won’t affect your credit score. Keep in mind, though, that the rate it gives you is an estimate. You won’t know your actual interest rate until your loan is funded.

Our Deep Dive

Available to those with less than established credit: Prosper is a good choice for those who have been turned away from banks and those who can’t get a reasonable interest rate. Prosper offers loans to people with FICO scores as low as 640, and while high-risk borrowers will be charged higher interest rates, these are certainly more affordable than what you could get through a payday lender.

Fixed-rate loans: All of Prosper’s loans come with a fixed interest rate, so you don’t have to worry about it going up over time.

Borrow up to $35,000: Prosper lets you borrow anywhere between $2,000 and $35,000. Most personal loan lenders don’t allow you to borrow more than $25,000, so Prosper is a good choice if you need to borrow a larger sum of money.

Quick online application: By answering a few basic questions about yourself and your finances, you are presented with an estimate of your interest rate, which should give you an idea of whether Prosper is the right choice for you.

Origination fee: Prosper charges an origination fee equal to two to five percent of the amount of your loan. The exact percentage varies depending on your credit score.

Limited loan terms: Prosper requires you to choose either a three- or five-year term. While this should accommodate most people, the majority of lenders give their borrowers more flexibility in terms of how they want to pay back the loan.

No prepayment fees: If you decide to pay your loan off before the end of the term, you won’t be charged an extra fee to make up for the lost interest.

Make money through investing: If you have cash to spare, you can make money by paying for portions of other people’s loans. When they pay back the loan, you will receive the money you put in, plus interest. The amount of interest you earn will depend on the interest rates of the loans you contributed to.

Mobile apps for managing money: Prosper’s mobile apps for iOS and Android devices help you track your spending and credit over time. Record all purchases so you can see how you’re spending your money and look for opportunities to save. You can also view your credit score and track its progress over time. For an additional fee, you can add identity theft protection services.

Cost Rundown

You won’t know how much a Prosper loan is going to cost you until you apply. You can get an estimate by filling out a simple application on Prosper’s website, but the actual rate may vary slightly once you actually put your loan up on the marketplace.

Prosper looks at your income, credit history, and other factors, then assigns you a rating (AA, A, B, C, D, E or HR). This plays a big role in determining where your rates are going to fall. Those with an excellent credit score may be eligible for rates as low as 3%. High-risk borrowers may face rates as high as 36%, though compared to what some banks and payday lenders charge high-risk borrowers, this may still be a good deal.

On the investment side of the equation, the costs are much more straightforward. You decide how much you want to contribute, starting off at just $25. As the borrower repays the loan, you will get your money back, plus interest. The greater the interest rate on the loan, the bigger your returns. You have to be careful when selecting borrowers, though, because if they default on the loan, you lose your money.

Cheaper (or Free!) Alternatives

You may be able to get a better rate on your personal loan somewhere else, but you won’t know without shopping around. Compare rates from your local bank, Prosper, and other online lenders to see which one can give you the cash you need at the lowest possible rate. Look out for hidden or prepayment fees, as this could lead to unexpected expenses down the road. You also want to make sure you choose a fixed-rate loan, if you can help it. If you go with a variable interest rate, your affordable monthly payments could become more costly over time as interest rates rise.

Shopping around is time-consuming, but it’s well worth the investment. Say you go with a $5,000 loan and a five-year term at 15% interest. Over the lifetime of your loan, that’ll cost you $7,136.98. At a 16% interest rate, that same loan is going to cost $7,295.42. That 1% difference equates to an extra $158.44 over the lifetime of your loan – and that’s just on a $5,000 loan. On a $10,000 loan, the difference would be twice as much. If you have the time to shop around for the best available rate on your personal loan, it’s worth it.

The Competition

OneMain Financial: Offering personal loans up to $30,000, OneMain is not a peer-to-peer lender like Prosper, but it’s still a good choice for those who have bad credit because there’s no minimum credit score to apply. OneMain also gives you more flexibility in choosing your loan term. Interest rates are comparable to Prosper for those with bad credit, but those with a good credit score may be able to find a better deal elsewhere.

LendingClub: Another peer-to-peer lender that pairs borrowers and lenders, LendingClub offers loans up to $40,000 with interest rates as low as 6.95% for those with excellent credit. If your credit isn’t great, you may pay up to 35.89%. There’s no hidden or prepayment fees and the interest rates are fixed. Lending Club requires a minimum credit score of 600, though, which may put it out of reach for some borrowers.

Disclaimer: All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 6.95% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. *The origination fee ranges from 1% to 6%; the average origination fee is 5.2% (as of 12/5/18 YTD).* There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.

Wells Fargo: A good choice if you’re looking for a bigger loan, Wells Fargo offers fixed personal loans from $3,000 up to $100,000. You won’t be charged any origination or prepayment fees, and if you have a Wells Fargo checking account, you could be eligible for discounts. You can apply online and get approved in as little as 15 minutes and have the funds transferred to your account the same day.

The Bottom Line

Prosper is a good choice if you need a loan, but don’t qualify for traditional financing. Interest rates are fixed and reasonable compared to most credit cards and payday loans, and there are no prepayment fees. However, you may not get your money right away, so be prepared to be patient.

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